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The video tutorial discusses creating word chains for encoding and decoding practice. A word chain is a curated list of words used for practice. Encoding involves spelling or translating speech to print, while decoding is reading or translating print to speech. When making a word chain, consider the level of challenge needed for practice, such as rhyme level or phoneme level. Rhyme level changes the initial consonant or consonant clusters, while phoneme level involves changing different sounds in the word.